Tesla’s Bitcoin hypothesis helped increase earnings by greater than $ 100 million within the first quarter

Tesla, led by Elon Musk, confirmed it bought around $ 1.5 billion worth of bitcoin in January and expects it to be accepted as payment in the future.

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Tesla reported first quarter results Monday, including a record net income of $ 438 million under GAAP.

As usual, these profits were made through the sale of environmental regulatory loans. That quarter, the company’s Bitcoin sales also contributed $ 101 million to its earnings for the quarter.

In February, Tesla caused a stir when it announced it would buy $ 1.5 billion in Bitcoin and said it may continue to invest in cryptocurrency.

On Monday, Tesla’s shareholder update revealed that the sale of Bitcoin had a “positive impact” of $ 101 million on the company’s profitability through March 31, 2021.

The company’s cash flow statement for the first quarter (page 26) had “digital asset” purchases of $ 1.5 billion and digital asset sales of $ 272 million for the quarter.

Elsewhere (page 5), the company stated that its profitability was improved by a sale of Bitcoin, which had a positive impact of $ 101 million net of impairments on ‘Restructuring and Other’. This translates into a $ 101 million reduction in operating costs on the company’s income statement (page 24).

This suggests the company quickly flipped part of its large Bitcoin purchase for a profit of $ 101 million as Bitcoin prices rose during the quarter.

As CFO Zachary Kirkhorn said during the earnings call, “Elon and I were looking for a place to store cash” that was not immediately used for returns. But they also had to be able to access their money quickly.

“Bitcoin has proven to be a good decision, a good place to put some of our money that isn’t used on day-to-day operations … and generate a return.” Kirkhorn added that while they are happy with the liquidity of the Bitcoin market, “our intent is to hold out over the long term.”

Tesla is now accepting Bitcoin payments from customers.

That being said, it is not clear how investing in and using cryptocurrency will serve the mission of Elon Musk’s electric vehicle and energy storage business. Tesla’s stated mission has long been to “accelerate the global transition to sustainable energy”.

Vicki Bryan, founder of bond investment research firm Bond Angle, wrote in an email to CNBC:

“Bitcoin is neither fungible nor logically advantageous as a currency, probably no safer for the owner than cash transactions and inexcusably harmful to the environment.”

According to Bryan, Tesla had raised around $ 1.6 billion in regulatory energy loans in the past, mostly zero-emission vehicle loans. Thanks to the loan sales, Tesla posted more than four consecutive quarters of profitability and qualified Tesla for inclusion in the S&P 500 index.

With Tesla’s Bitcoin purchases, Bryan said, Tesla is adding a volatile asset with limited visibility to its annual financial statements that “already hides the crucial clarity of key operations and financial terms.”

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